Economic development and taxes

Does economic development result in reduced local taxes?
The short answer: no one knows.
The longer answer: studies of specific cases, as well as meta-studies of their results, indicate considerable variation in study methods, objective results, and conclusions.
The following is a collection of some of the available information.

"Impacts of Development on DuPage County [Illinois] Property Taxes"

The following conclusion from the above study is the one most often cited by other investigators:

"... there is a significant statistical relationship between new development (both residential and nonresidential) and increases in personal property taxes."

The original 1991 study has been faulted on several grounds.
An analysis of the study and a proposal for a follow-up were done at the University of Illinois a year later.
Here's an abstract (no longer available at the University website).
It does not appear that the suggested follow-up study was ever done.

The Technological Reshaping of
Metropolitan America, Chapter 8 discusses urban sprawl and has extensive lists of the kinds of costs that may be incurred.
It cites the DuPage study, claiming it shows that "even commercial and industrial uses eventually cost more than they produce in revenue because they attract added residential development."
Comprehensive.
Created by the Office of Technology Assessment,
Congress of the United States.

This book, written in 1993 by two Harvard public policy and planning professors, researches the practice of requiring exactions: "mandated expenditures by private land developers, required as a price for their obtaining regulatory permits, in support of infrastructure and other public services." (from the preface).
Along the way, they looked at other methods of providing public infrastructure and services, including taxes.

Among their conclusions, as cited by others:

"The available evidence shows that development does not cover new public cost; that is, it brings in less revenue for local governments than the price of serving it is." (p.77)

Chicago area Metropolitan Planning Council study

This 1995 study analyzed the effects of commercial and industrial growth on local property taxes in a six-county region.

Among the key findings were:

Business growth was associated with lower residential property tax rates than otherwise would have occurred.
Communities seek business growth to bolster their own fiscal resources.
However, unintended consequences may follow.

Population growth generally was associated with increased residential tax burden.
Residential development can increase the tax burden by raising demand for services such as schools.

Because people tend to follow jobs, with business growth encouraging population growth in a cluster of communities, economic development in one community may create higher tax rates for nearby communities, which do not receive the tax benefits of the business growth.

Group revenues and expenditures and allocate them to the community's major land use categories.

Analyze the data and calculate revenue-to-expenditure ratios for each land use category.

An often-cited result of one of these studies, conducted by the Trust in Frederick County Maryland in 1997, was:

For each dollar of tax revenue generated, a residential property created $1.14 in costs, while "working and open land", including farms, created only $.53 in costs.

(Seldom cited is the fact that, in this same study, Commercial and Industrial property came in at $.50, demonstrating a trend that holds for the average of many COCS studies over the last 20 years: commercial development costs a community least, then open land, then (most expensive and the only category generating more cost than revenue) residential development).

Another COCS study, covering Scio Township in Washtenaw County Michigan, found that for every local dollar raised from low-density single-family housing in the township, the community spent $1.40 in services.

The state of Maryland has produced a Teacher's Resource Guide on growth issues which cites the COCS method and adds the following:

"The results of the COCS studies are consistent with those of conventional fiscal impact analyses that document the high cost of residential development and recommend commercial and industrial development to balance local budgets.
In every community studied, farmland generated a fiscal surplus that offset the shortfall created by the residential demand for public services.
This was true even when land was assessed agriculturally."

The Utah governor's office of Planning and Budget has created an online tool that calculates the fiscal impact of various land use patterns, however it uses COCS ratio data specific to areas within Utah and therefore cannot be used directly in other areas.
There is also a detailed paper on the methodology used by this tool (6 Mb .pdf), including lists of local government revenue sources and expenses.

The Economic Value of Open Space:
A Review and Synthesis goes beyond tax implications to look at the total economic value of undeveloped land.
Numerous studies are cited.
Within their conclusions, the authors state that "open space can be seen as a non-depreciating, non-reproducible asset with increasing benefits through time.
By contrast, poorly planned development can depreciate in value and create significant liabilities for communities.
Similarly, open space possesses the option value of conversion to developed use, while development is rarely reversible."